Tanzania: Mining Firm Acacia to Spend Millions to Clean Up Image

Tanzania’s largest mining company, Acacia, has set aside $2 million (Sh4 billion) to clean up its image and repair its relationship with the government following accusations of tax evasion and excessive profits, the South African Globe and Mail newspaper reports.

Acacia Mining, which is a subsidiary of Toronto-based Barrick Gold Corp, owns three gold mines in Tanzania that include Buzwagi, Bulyanhulu and North Mara. But it has faced a growing barrage of accusations from political leaders.

“Governments, probably rightly, don’t think they’re getting a fair share of the wealth. So, we need to get smarter about how that wealth is distributed. I just think we need to look at the distribution of that wealth and how taxes are paid,” Acacia chief executive Brad Gordon told the Globe and Mail in an interview at the sidelines of a mining conference in Cape Town on Monday.

The $2 million will involve a branding campaign in print, radio and television advertising in Tanzania to showcase its huge investment and capital spending in the country.

The advertising is similar to the kind of campaign that a company such as Coca-Cola would launch, Mr Gordon told the Globe and Mail: “We don’t just want to be seen as a mining company. We market ourselves more like a consumer-products company.”

Barrick Gold Corp has unsuccessfully tried several times in the past to sell off Acacia, its Africa offshoot, whose mining activities are exclusively located in Tanzania. Barrick is now in talks with its Toronto-listed rival, Endeavour Mining Corp, about a potential $4 billion (Sh9 trillion) merger. The Acacia also plans to pay its taxes well ahead of its schedule to reduce tax controversies. The company has had its fair share of tax disputes with the Tanzania Revenue Authority (TRA), some of which, have ended in the courts of law.

Under agreements signed when Acacia’s predecessors first entered the country, the company was able to pay no corporate taxes in Tanzania for a 15-year period. It seemed like a good deal at the time, but now the company faces a backlash – part of the increasingly fraught relationship between African governments and the mining industry.

“There’s just no trust,” Mr Gordon told the Globe and Mail in an interview, adding “They talk about the billions of dollars that have been ripped out of the continent over a long, long time.” Asked whether the growing criticism of the industry is due to a perception problem or a justice problem, he answered: “A bit of both.”

Last year TRA accused Acacia of tax evasion saying it had failed to pay corporate tax while still paying more than $400 million (Sh840 billion) in dividends to its shareholders. The Tax Revenue Appeals Tribunal ordered Acacia to pay $41.25 million (Sh86 billion) in taxes. The company’s appeal in the High Court was dismissed on procedural grounds in October, but the company is still fighting the ruling.

To help allay the criticism of Acacia’s lack of corporate taxation, the company decided to make a goodwill gesture: It paid $20 million to the Tanzanian government in what it called a “prepayment” of taxes, before the taxes were legally required to be paid.